Advance Tax : Rules, Calculations, and Due Dates

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Hiral Vakil

Advance Tax
Presumptive Tax
Salary Income

Index

What is Advance Tax?

Advance Tax is a part payment of your tax liability before the end of the financial year. Another name for it is – “pay as you earn scheme” where the income tax should be paid in the year in which the income is received.

Who is required to Pay Advance Tax?

Every person whose tax liability for a financial year exceeds INR 10,000 has to pay it on an installment basis. Income from all the heads is added to calculate tax.

Advance Tax Filing (Quarterly)
CA Assisted Advance Tax calculation and payment for Individuals and businesses with tax payable more than INR 10,000 after TDS deducted
[Rated 4.8 stars by customers like you]
Advance Tax Filing (Quarterly)
CA Assisted Advance Tax calculation and payment for Individuals and businesses with tax payable more than INR 10,000 after TDS deducted
[Rated 4.8 stars by customers like you]

For Salaried individuals

In the case of a person having income from salary, the employer calculates the tax on salary. He is responsible to deduct tax (TDS) from your salary income and deposit the same to Government. So salaried person does not have to pay advance tax on salary income.

However, if a salaried person is having income other than salary (for eg. rental income from house property or interest from fixed deposits etc.), and if tax liability on such income exceeds INR 10,000 then he has to pay advance tax. It is very common for salaried people to have alternate income sources and as a result, they would become liable to pay this tax.

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File ITR Online

India’s fastest growing Tax Filing Platform

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For Presumptive Taxation

Up until FY 2015-16, assessees opting for presumptive taxation scheme were not required to pay advance tax. However, with effect from FY 2016-17 (AY 2017-18), assessees opting for presumptive taxation scheme will have to pay the tax amount in a single installment on or before 15th March. From FY 2016-17 (AY 2017-18), Freelancers and professionals can also opt for the presumptive taxation scheme and avoid the cumbersome tasks of maintaining books of account and audit.

The “Pay-as-you-earn” liability for the presumptive taxation scheme is to be calculated and paid only once before the end of the financial year. Here is how the tax should be calculated for the presumptive taxation scheme:

Assessee typePresumptive incomeAdvance tax liability
Business owners8% of Turnover or Gross receiptsTax at slab rates on presumptive income (flat 30% in case of partnership firm)
Professionals (Freelancers)50% of professional fee receiptsTax at slab rates on presumptive income (flat 30% in case of partnership firm)

For Freelancers/professionals

Freelancers and professionals who do not opt for the presumptive taxation scheme have to calculate and pay advance tax on an installment basis. They have to estimate their annual income and calculate the tax on the same because in most cases TDS which is deducted by their customers/clients while making payments, is not enough to meet the total tax liability.

Section 234B: Interest penalty for non-payment of Advance Tax
The due date for filing the ITR is always defined and if you miss the deadline to file your ITR, you might face the consequences like having to pay interest based on Section 234
Read More
Section 234B: Interest penalty for non-payment of Advance Tax
The due date for filing the ITR is always defined and if you miss the deadline to file your ITR, you might face the consequences like having to pay interest based on Section 234
Read More

Advance Tax Calculation

Time needed: 10 minutes.

  1. Estimate your income

    Estimate your income from business or profession. Add all the incomes from ongoing projects or assignments whose fees are already determined. Also, add the incomes which are expected on the basis of ongoing interactions with clients/customers.

  2. Subtract the expenses

    You are allowed to deduct the expenses which are directly related to your business or profession. Rent, electricity, legal and professional fees, books, fuel expenses, the salary of employees, depreciation, etc. are some of the expenses which are allowed to be deducted from the income.

  3. Calculate the tax liability

    Add incomes from remaining sources like house property, capital gains, income from other sources, etc. Then calculate the tax liability for your total income on the tax slab rates and deduct the TDS which has already been deducted from your income.

  4. Assess your tax liability

    If the resulting tax liability is more than INR 10,000 then you are required to pay advance tax on an installment basis as per the schedule given below.

Section 234C: Penalty for Advance Tax delay in payment
The due date for filing the ITR is always defined and if you miss the deadline to file your ITR, you might face the consequences like having to pay interest based on Section 234
Read More
Section 234C: Penalty for Advance Tax delay in payment
The due date for filing the ITR is always defined and if you miss the deadline to file your ITR, you might face the consequences like having to pay interest based on Section 234
Read More

Advance Tax Due Dates

Due date of installmentAdvance Tax payable by Individual and Corporate Taxpayers
On or before 15th June15% of the tax liability
On or before 15th September45% of the tax liability
On or before 15th December75% of the tax liability
On or before 15th March100% of the tax liability
Advance Tax Filing (Annual)
CA Assisted Advance Tax calculation and payment for Individuals and businesses with tax payable more than INR 10,000 after TDS deducted
[Rated 4.8 stars by customers like you]
Advance Tax Filing (Annual)
CA Assisted Advance Tax calculation and payment for Individuals and businesses with tax payable more than INR 10,000 after TDS deducted
[Rated 4.8 stars by customers like you]

FAQs

Do salaried people have to pay advance tax?

​In the case of salaried individuals, TDS is deducted from their salary and deposited to the government by their employer. So as far as salary income is concerned, they are not required to pay advance tax. However, for all the incomes other than salary, if the total of such incomes exceeds INR 50,000 then they will have to assess the tax liability on the same and pay tax.

How do I determine whether I am liable to pay advance tax or not?

​Before every due date for payment of advance tax, you will have to calculate your expected annual income and determine the tax liability on the same. If your total tax liability exceeds INR 10,000 then you are liable to pay it as per the schedule has given above.

How to pay advance tax?

​There are two ways of tax payment:
– Deposit in the bank with advance tax challan or
– Online payment using Net banking facility

What if I don’t pay advance tax on time?

​As mentioned above, if you fail to pay advance tax or make a late payment of it, you will have to pay penal interest. Under section 234B, interest for default in payment of advanced tax is levied at 1% simple interest per month or part of a month

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